Ministry of Industry: "Blue Whale Project Lacks Economic Feasibility... Low Gas Saturation"

Ministry of Industry Announces Preliminary Results of First Drilling
Investment Attraction Procedures to Begin Around March This Year
"Success in Attracting Investment Will Determine Whether Additional Drilling Proceeds"

Preliminary results indicate that the gas saturation level of the Daewanggorae prospect, the first drilling target in the 'East Sea deepwater gas field,' is low, making it economically unviable. The government plans to conduct a detailed analysis of the samples and data obtained from this first drilling and announce the results in August.

On the 6th, a senior official from the Ministry of Trade, Industry and Energy told reporters, "With the gas saturation level observed at Daewanggorae, it is difficult to consider it an economically viable gas field."

West Capella, the vessel that conducted the blue whale drilling.

Previously, in May last year, the government announced that there are 14 billion barrels of oil and gas reserves off the coast of Yeongil Bay, Pohang. Subsequently, in December of the same year, the first drilling operation began at Daewanggorae, one of the seven promising structures, and was recently completed. The official stated, "We have not yet conducted a detailed analysis, so it is difficult to provide specific figures," adding, "This explanation is intended to provide accurate information on the progress due to high public interest in the Daewanggorae drilling and its impact on the stock market."

According to the Ministry of Trade, Industry and Energy, during the drilling process at the Daewanggorae structure, some gas was confirmed, but it did not reach a level sufficient to secure economic viability. As a result, the Daewanggorae well has been restored to its original state. Confirming the low gas saturation at Daewanggorae means that no further drilling will be conducted there.

However, the ministry evaluated that the Daewanggorae drilling will have a positive impact on future additional drilling. The official said, "After further adjustments on the remaining promising structures, the data can be usefully applied in subsequent drilling efforts," and added, "Before the detailed analysis results of the first drilling come out, we plan to release interim results including specific figures around May to June."

The decision on whether to proceed with further drilling, including the location and timing, has not yet been made. The government plans to start procedures for attracting investment from next month, and the success of this investment attraction is expected to be a key factor in deciding on additional drilling. A ministry official emphasized, "There are already global major companies that have expressed interest in bidding for investment, and if investment attraction succeeds, drilling will be conducted through consultations with these companies," adding, "At this point, successfully attracting investment is considered the most appropriate means to drive further exploratory drilling."

Meanwhile, the ministry expressed a cautious stance regarding other promising structures such as 'Magwisaeng-eo' (Devil Shark) discovered in the Ulleung Basin of the East Sea. Actgeo, a U.S.-based deepwater technology evaluation specialist company that conducted physical exploration analysis of Daewanggorae, recently submitted a report on the 'Additional Prospectivity Assessment of the Ulleung Basin' to the Korea National Oil Corporation. The report included findings of 14 new promising structures in the Ulleung Basin area with high potential for gas and oil deposits. A ministry official said, "In last year's first prospectivity evaluation, seven promising structures including Daewanggorae were announced, but the analysis of shallow water exploration data located in the southern part of Block 6-1 was missing from the scope of the first evaluation," adding, "A second prospectivity evaluation is underway for this area, but it is still in the reliability verification stage."